Microsoft settlements could pay off for neediest schools

By Corey Murray, Assistant Editor, eSchool News

May 10th, 2004

California’s neediest schools could be in line for a huge financial windfall later this year. As the deadline draws near for consumers to claim their share of more than $1.1 billion in software vouchers–the result of Microsoft Corp.’s record antitrust settlement with the state–customers largely have been slow to respond, leaving the door open for educational institutions to divvy up what could be millions of dollars in technology handouts.

According to an April 13 story in the San Jose Mercury News, only about 4 percent of the 14 million Californians who are eligible for the vouchers have filed claims so far. The Mercury News reported that individual consumers have accounted for 590,000 claims, while businesses have filed just 2,500 such requests.

The claims administrator for California refused to verify those numbers for eSchool News, stating that it is against policy to give out exact figures. A department supervisor did say the administrator receives thousands of vouchers each day from eligible applicants.

But if the Mercury News figures are correct and the lackluster response continues, California schools could receive a significant portion of the settlement. Under terms of the agreement, schools in the Golden State can apply for two-thirds of any vouchers not claimed by consumers.

What’s more, if the response in California is any indication of what other states can expect, schools in the eight other states (Florida, Kentucky, Minnesota, North Carolina, North Dakota, South Dakota, Tennessee, and West Virginia) and the District of Columbia that have reached similar settlements with Microsoft also stand to benefit.

In California, educators already are champing at the bit to take advantage of any unclaimed technology vouchers.

“One of the big benefits I see for my district is an opportunity to upgrade old computers and software to bring our technology for kids up to date, so it is more capable with our infrastructure and high-speed connectivity,” said Marc Liebman, superintendent of the Marysville Joint Unified School District, which serves close to 10,000 students across 24 schools. “I am excited about that.”

State Superintendent of Public Instruction Jack O’Connell recently sent a letter to schools explaining the eligibility requirements.

“We will have every [eligible] school apply based on the needs identified in its site plan,” Liebman said. “We are anticipating sharing in the spoils.”

Although consumer representatives say they believe the number of claims filed by consumers will increase as the deadline approaches, Microsoft officials say they aren’t surprised by the lack of interest exhibited so far.

Stacy Drake, a company spokeswoman, claims some consumers won’t take advantage of the vouchers simply because they don’t believe they were overcharged for the products. Others, she said, might simply prefer that the money be left to the schools.

State claims administrators say the earliest that claims will be due is June 11, but that deadline isn’t fixed and likely will be extended to give consumers more time to file.

The settlement stems from a class-action lawsuit filed in 1999 on behalf of California consumers and businesses, alleging the Redmond, Wash.-based software giant violated antitrust laws.

The deal requires Microsoft to provide $1.1 billion in vouchers, which is equivalent to 28.4 percent of all the money that California consumers and businesses paid for Microsoft products over a six-year period beginning in February 1995.

Under the agreement, announced Jan. 10, proceeds of the settlement will be distributed in the form of vouchers redeemable for computers and software products to customers who provide proof of purchase of Microsoft’s operating system, productivity suite, spreadsheet, or word processing software between February 1995 and December 2001.

Two-thirds of any unclaimed portion of the settlement amount will go to California’s poorest schools in the form of software, hardware, and money for technology programs. Schools need not purchase Microsoft products with the settlement proceeds.

At the time of the agreement, lawyers estimated the settlement would benefit more than 3 million low-income students in more than 4,700 schools across the state. Only schools with approved technology plans and with more than 40 percent of students qualifying for free or reduced-price lunches are eligible.

For two years after credits are issued, schools can redeem half of the total distribution for computers and other hardware, software, professional development services, support services, training, and non-custom computer products for students with special needs. The rest can be redeemed for certain types of software sold by any company, including Microsoft.

Once business and consumer plaintiffs have received their portions of the settlement, eligible schools will be allowed to apply for whatever funds are left over.

Although it is expected that schools will submit technology orders to their district office, and the district then will communicate these orders up to the company, state education officials and other involved parties have yet to nail down the details of the application process.

Microsoft could not say how soon the money would be available to schools, but it could be several months before schools are even able to apply.

Although California is by far the largest example, similar class-action lawsuits have been filed in 15 other states and the District of Columbia. As of press time, Microsoft had reached agreements with all but seven: Arizona, Iowa, Massachusetts, Mississippi, Nebraska, New Mexico, and Vermont.

On April 19, the company struck its latest settlement agreement with Minnesota consumers. Although official figures aren’t expected until June, sources close to the agreement say the terms of the deal will be similar to those arrived at in other states.

To date, Microsoft has agreed to more than $1.55 billion in settlements to compensate plaintiffs of class-action lawsuits in the United States.

Elsewhere in the world, Microsoft’s antitrust skirmishes with businesses and consumers continue.

In March, the European Commission, an international regulatory body responsible for enforcing competition for the European Union (EU), ruled that Microsoft engaged in unfair business practices by leveraging its monopoly on the software market there. The EU rebuffed a settlement proposed by the software maker and said it intends to sue Microsoft in court. Microsoft executives vowed to appeal the decision.